BARRIERS TO INNOVATION IN INDIAN SME’S

To improve the innovation performance of SMEs, it is very important to understand the key barriers in the innovation system. The barriers to innovation are classified in six categories: people, financial, information, market constraints.

People and Skills as a Barrier to Innovation

SMEs are generally unable to recruit a highly skilled workforce due to financial constraints and lack of infrastructure. This includes internal management. The lack of the right internal management can impact both the firm’s innovation capability and its overall performance.

Finance as a Barrier to Innovation

The financial barriers mainly involve the availability of internal and external finance and the cost of innovation. There is an urgent need to address this formidable challenge by bringing down the cost of innovation and increasing the availability of innovation capital through banks and other support mechanisms.

Information as a Barrier to Innovation

Timely access to valuable information is critical for SMEs to gain strategic advantage in pursuing innovation. The inability to access key market information can seriously impair a firm’s performance.

Market Factors as a Barrier to Innovation

Market factors have an important role to play in innovation. Market characteristics such as competition, nature, dominance and monopoly, and demand, among others, affect a firm’s ability to innovate, especially product- and market-related innovations.